The central legal point established in the judgment is that the nature of the transactions, their frequency, and their relationship to the assessee's business are crucial in determining liability for income tax.

Walter Salis Schwabe, K.C., C.J.

1. The assessee is a Nattukottai Chetty carrying on business in Madras and elsewhere as banker and money-lender. In the year of assessment, he remitted from Madras sums aggregating over 4 lakhs of rupees to Penang, such sums being invested there in Straits Settlements dollars, and ultimately reconverted into rupees and remitted back to Madras. The remittances were made on eight occasions within a period of four months in 1919 and the retransfer to Madras was on thirteen occasions covering a period of four months from the end of 1920 to the beginning of 1921. Owing to the fluctuations in exchange, which varied between 83 and 175 rupees per 100 dollars, the assessee made a profit of a considerable amount on the transactions. He has been assessed to income tax on that profit, and the question referred to this Court is whether he has been correctly assessed. Under Section 51(1) of the Income Tax Act which was then to force, any question which has arisen with reference to the interpretation of any of the provisions of this Act may be referred to the High Court. This action probably gives wider powers than Section 66 of the Indian Income Tax Act of 1922, the consolidating Act now in force, which limits the references to the High Court to questions of law. It is not, however, necessary to consider the exact meaning of the words of these sections because, the facts having been found, the question whether or not they bring the income within the reach of any particular section of the Act is a question of law.

2. Section 3 of the Act applies to all income from whatever source it is derived, if it accrues, or arises, or is received in British India. Certain exceptions are set forth in Section 3(2) and among those exceptions is to be found (VIII) "any receipts not being receipts arising from business or the exercise of a profession, vocation, or occupation which are of a casual and non-recurring nature." By the combined effect of Sections 5 and 9 income derived from business is chargeable to income tax in respect of the profits of any business carried on by the assessee. In the United Kingdom, income-tax is payable on the balance of profits or gains derived from carrying on a trade or business. I can find no distinction in this matter between the laws of the two countries. The English Acts have not got the exception in so many terms of receipts of a casual and non-recurring nature; but, as, by the words of Section 3(2)VIII of the Indian Act, receipts of a casual and non-recurring nature are only exempted when they are not receipts arising from business, the question to be considered both in India and England is whether a particular receipt is properly brought into account or omitted in arriving at the profits of a business. If the transactions are business transactions and result in a profit or loss made in the carrying on of the business, they must be brought into account; otherwise not. The questions which have arisen for decision have been whether particular transactions form part of a business carried on by the assessee. They need not be part of some already established business but they must together form a business. If the transactions form part of the original business of the assessee the profits or losses on them must, of course, be brought into account. But where the transactions are outside the scope of the ordinary business of the assessee it is often a difficult question to decide whether or not they are to be treated subject to income-tax. Profits may be made by the realisations of security or by the sale of land or moveable property and, in the case of one man they may be merely successful realisations of assets or alterations of investments while in the case of another man they may form part of the income of a business. To give a simple illustration a Barrister might buy a picture and at a later date when the works of the particular artist were in demand, sell that picture and realise a